Good day, and welcome to The Indian Hotels Company Limited's Q2 for FY20 earnings call being hosted by Mr. Puneet Chhatwal, MD & CEO, IHCL, and Mr. Giridhar Sanjeevi, EVP & CFO, IHCL. As a reminder, all participant lines will be in the listen only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touchtone phone. Please note that this conference is being recorded. At this time, I would like to turn the conference over to Mr. Giridhar Sanjeevi, EVP and CFO, IHCL. Please go ahead, sir.
Hi. Good evening to all of you who have joined the call today. Many thanks for joining. I think I take the opportunity of welcoming all of you. What we will go through now is a short presentation on the performance of the company and the results. To start with, I pass the call to Mr. Puneet Chhatwal, Managing Director, to start the presentation. Thank you.
Thank you. Good evening, everyone, and thank you for joining so late in the evening. I would like to begin with sharing a news that as we are having this call, we are having a religious ceremony at what will be the Taj Tirupati. We are preparing for the opening, and the hotel will open any time between the 15th of this month to the end of the month, depending on the opening certificate. This is 106 room properties with four food and beverage outlets, and it is in line with our strategy of strengthening our presence in the religious tourism sector. That too now with a Taj property, which we are very proud of. Moving on our key highlights.
On the Aspiration to Execution, a short reminder, we said we will grow our margin by 800 basis points as a part of Aspiration 2022, which we unveiled last year in February, that we will add 15 new projects to our pipeline every year and have a balanced portfolio which is 50% on fee-based business and 50% which is owned or leased properties. Where do we stand on that? I think it's a journey which you can see, especially in the results of the last full year, where the revenue increased to INR 4,600 crores, the EBITDA to almost INR 900, EBITDA margin came to 20%, and we almost reached INR 300 crores in profit after tax. A return on equity almost of 7% coming from a negative of seven, four years ago, and a net debt to EBITDA coming down from 6.5 to 2.1.
A portfolio of hotels, which we stood at 158 when we announced the Aspiration, then finished last year at 179. This is something which we've already communicated, that we are at 192 properties, of which 151 are in operation and 41 are in pipeline. We are well within our target and our guidance of opening a hotel every month. If we look at the last 18 months, which is this last six quarters, and we try to focus this time a bit on what we have achieved in the last six quarters. We have signed 36 new agreements, well distributed over our three mainstream brands, that's Taj, Vivanta, and Ginger. SeleQtions, as the name suggests, is a collection of certain hotels which do not really fit into a brand but are very nice properties to have, like The President in Mumbai or The Ambassador in Delhi.
There also, we've been able to add four assets, including the famous Siddharth in Goa, and then we are opening in Jaipur in December with Devi Ratn. You all are aware of The Connaught in New Delhi, and another property in Jaipur. I think 36 contracts, signing of two contracts a month, and with the target of, as of this year, opening a hotel every month, seems quite imminent. If we then further go on what we have done in the openings, then you will see that 15 hotels are to open in this year, which we may not achieve because certain openings always get delayed, but definitely the 12 will be achieved. Ginger Dwarka, Sanand, Madgaon, Patna, Siddharth as SeleQtions, and Agra as the Taj Convention Centre have already opened.
We are hoping to open, as I said, Tirupati very soon, the Taj Convention Center in Goa in the middle of February, the Jumeirah Lake Towers in Dubai in December, the Connaught in Delhi, the Devi Ratn in Jaipur, as well as three more Gingers are expected to open over the next five to six months. We are quite confident that in all we will be able to open 12 of these 15 that we are showing you on this chart. Going forward, if you also look at the last six quarters, every quarter consistently, we've been able to expand our margins. Although the impact in this quarter looks very high, it's a little bit assisted also by the new accounting standard, which makes your increase in margins look very green and the increase in PAT look a little less green.
It balances out in the end. We are quite pleased with performance because as you all know that Q2 is the weakest quarter historically, and has always been for the industry in general and IHCL in particular. When we look at the Q2 RevPAR growth compared to the industry, the industry on an all-India basis, this is based on data we have received from STR Global. The RevPAR was at INR 3,254. RevPAR growth was 3.1%. We have had a RevPAR of INR 4,833, which is all-India basis only, and a RevPAR growth of 3.9%. When it comes to also certain key markets, it's very important for us because our footprint in some of these markets is very significant, especially in Mumbai, Delhi, Chennai. Also Bangalore and Hyderabad is quite significant.
Actually, Bengaluru would have been much higher, but our flagship and trophy asset, Taj West End, had certain rooms out of order as we were renovating them, especially the suite offering in Taj West End, which is now come online and is beginning to show very positive results. We've been very focused on driving our market share. As the top-line growth was not coming to the extent that we would have all liked it to, one of the key levers we had was how to improve our market share. I think what we've been doing is in the key markets, we've been gaining market share from our competitors. At the same time, as we had announced in February 2018, we have been very focused on cost optimization.
We said the 800 basis points, like almost 50%, will come through top-line growth and 50% will come through cost optimization, as the scale that we are aiming for does not necessarily mean that there is a direct correlation in the increase in cost, especially on the corporate overheads. As you can see, the corporate overheads start looking now already 125 basis points lower as a percentage to the revenue versus the same quarter last year. That is coming also because of the scale. You keep your expenses under check as a percentage, they start then going down on the total revenue if that keeps increasing. Same is with the raw material cost, which has come down. Also, we have taken on significant projects as one of the highest expense on an increase basis. The highest increase in expenses is in heat, light, and power.
We are very pleased to see that we have been able to keep this expense also under strict control. When we further move on to our brandscape, which is a very important part of our growth strategy, you are all aware that we launched amã Stays & Trails. We have 12 operational bungalows and we have six more to open over the next few months. 20% of the Ginger Lean Luxe portfolio has been already repositioned to the new Ginger positioning, to the new look and feel of the brand. Same thing has happened with nine Gateway properties have migrated to Vivanta successfully. 10 more will follow before the end of this financial year. Further, we relaunched The Chambers value proposition. We relaunched our salon brand in the new and now as the brand name.
We tied up with AB InBev to do Seven Rivers, which is our microbrewery brand together with AB InBev, which we have an exclusive right with them. The first one will be opening in Taj on the MG Road in Bengaluru. In summary, I would say that Indian Hotels has been able to deliver strong performance across all parameters. It's industry leader in development momentum in terms of signing new hotels. As you know, we have signed already this year in the first six months, 14 hotels totaling 2,000 rooms. As I showed earlier, 36 new properties added to our pipeline in the last 18 months without using our capital except for the one that is at Connaught in New Delhi. We are on track to open more than a hotel a month in this financial year.
We have had six consecutive quarters of EBITDA margin expansion, which is in line with our Aspiration 2022 as highlighted to all of you. We have higher Q2 RevPAR growth recorded compared to the industry. Our RevPAR performance is positive compared to competition in all the key markets. We are focused and we remain extremely diligent on cost optimization despite launching new brands, despite aggressively marketing our existing brands by containment of costs in corporate overheads, repairs and maintenance in heat, light, and power costs. Having said that does not mean that we are not adding talent. We just added a head of digital who we have hired from TCS, who joined us this month. Digital is an important part of our strategy and our industry taking us forward. We remain very focused on unlocking the value of all brands under IHCL.
I think this actually makes a good summary and now how this translates into financial performance that you can see that our revenue for the quarter increased by almost 5%. We touched INR 1,000 crore, which we have never touched in the last 10 years or even earlier. Our EBITDA increased by 57%, to INR 182 crore. Our EBITDA margin was up by almost 600 basis points to 17.65%. As I said before, this is one of our weakest quarters, or not one of, it is the weakest quarter among the four quarters. Our PAT has had a INR 76 crore swing on this quarter versus the same quarter last year. With that, I think we can also see what I just mentioned about the last 10 years.
If you look at this chart, on the top you will see in the light blue highlighted, the top line that we hit INR 1,000 crore. It's quite a good jump because already last year was a good year, but if we go back a few years, it is showing almost a 15%-20% increase, over where we were a few years ago. Our expenses are not showing a 15%-20% increase. At the same time, that is what is driving our EBITDA margin, including our operating EBITDA margin. We were PBT, marginally negative, this is because of the new reporting standards. If we had the old ones, it would be positive, the PAT was also positive. With that, we can now move on to the first half of the year.
If we looked at the first half, the first six months of this year, we hit for the first time INR 2,000 crores in revenue, almost INR 2,100, a 6% increase. An EBITDA of INR 392 crores, which is 62% increase over last year, an EBITDA margin of 18.8%, a 658 basis point increase, and a PAT which has gone up 7.7 times. Of course, aided by one or the other tax reversal. We also get one or the other negative impacts in some quarters or in certain years. This time it's been positive for us. Again, if we look at here, the first half performance, as you can all see that we never had INR 2,000 crores in revenue. Our total income was almost INR 2,100 crores, and our EBITDA touching INR 392 and a margin of 18.8%, a PBT of INR 20 crores and a PAT of INR 77 crores.
With that, I would like to hand over to my colleague, Mr. Sanjeevi, who's the Chief Financial Officer. Over to you, Giri.
Thank you. I think, continuing from where Puneet kind of left off, I think what we have tried to summarize in a very simple way is the kind of summarized impact of the performance with pre-Ind AS and post-Ind AS. I think very clearly you see, this summarizes the previous slide in terms of growth of revenues of 4.8% on a pre-Ind AS basis. EBITDA very clearly at 17.8%, EBITDA margin growth at 1.5%, and an operational EBITDA margin growth of 1.16%. Exceptional items were marginal at this point of time. Profit after tax, INR 71 crores is what we reported in Q2. On a pre-Ind AS basis, INR 82 crores actually. I think this summarizes in a simple way the pre and post-Ind AS impact. Going forward, I think you will also see the detailed consolidated report.
I think what is good to see is that, in terms of expenditure focus, as revenue grew by 4%, I think the expenditure focus has always been there actually. That has resulted in the leverage. I think that is the most important thing. If many of you remember, I think we have always been saying that we will do everything we can in terms of making sure that we report an operating EBITDA leverage actually. That is something that we have been able to do. Depreciation and finance cost here reflects the impact of the new accounting standard. Exceptions, we don't have any other item. As stated, we had, due to the new tax regime, a reversal in terms of deferred tax liability, and that is reflected in the final number of INR 71 crores for the post-Ind AS number.
In terms of exceptionals, there's nothing much to report. We had a sale of flats included. That is about INR 8 crores or so. Other than that, there's nothing exceptional included. When we move on to H1. H1, again, I think what we see here is that as Puneet mentioned, we crossed the INR 2,000 crores in terms of top line. We continued to show the EBITDA margin expansion of 2.3%, and an operating EBITDA margin expansion of 1.24%. Once again, no exceptionals and profit after taxes was about INR 77 crores for the quarter actually. Similarly, I think the consolidated P&L for H1 shows a similar story in terms of tight control on costs and managing leverage, and also reflects the final performance of INR 77 crores, in terms of the PAT. Consolidated exceptionals, we didn't have much.
In terms of the network revenue, I think F&B revenue grew in domestic by about 3.6%. Room revenue grew by 8.7%. RevPAR grew by 3.9%. Very strong focus in this quarter in terms of driving occupancy growth, actually. International also was fairly stable in terms of overall international operations. U.S. did okay. The St. James' Court did very well, actually. Overall international operations were kind of stable and accretive. Okay. If I look at the H1 revenues again, I think you will see this very clearly that the international operations were strongly accretive in terms of RevPAR. In terms of domestic, we continue to drive room revenue growth and to drive the performance actually. Moving on to standalone very quickly. Standalone key indicators were INR 625 crores of top line. EBITDA was about INR 148 crores.
Standalone reflects the EBITDA margin expansion of 0.96% on an operating basis. It includes about INR 8 crores in terms of sale of flats. Profit before exceptional items and taxes were about INR 37 crores. Profit after tax was INR 119 crores. Similarly, on an Ind AS basis, we continue to reflect the impact of Ind AS across the line, and overall profit after tax of INR 119 crores. The detailed P&Ls also reflect the focus in terms of not just working on the revenue levers but also on expenditure control, which driving the EBITDA margin expansion and an overall PAT of about INR 119 crores.
Exceptional items, I think as far as Q2 is concerned, I think the only item to note is that like we have done for the last three years, whatever was the cash losses in the Piem, we have kind of provided for it in standalone of INR 27 crores. I think the good thing is that the Piem losses have come down in the quarter from INR 31 crores to INR 27 crores. That is getting reflected in the half year numbers as well. In terms of H1 as well, the total revenue was INR 1,233 crores and EBITDA was INR 293 crores. Once again, it showed a margin expansion of 1.7% and operating margin expansion of slightly under 1%, actually. Includes the EBITDA from sale of flats of about INR 33 crores is included.
H1 profit before exceptional items and tax was about INR 73 crores, and profit after tax was a strong INR 141 crores actually. Once again, showing the impact on Ind AS 116, which you can look up. Standalone reported P&L again kind of reflected the leverage and the overall performance of INR 141 crores. Exceptional items for H1, as I said, I think we didn't have any derivative contract losses. We had a profit on sale of Taj Madras Flight Kitchen shares actually. The Pierre losses clearly reduced from last year, INR 32 crores to INR 26 crores. That continues our effort in terms of improving the performance there. In terms of acquisitions and monetizations, I think we have just announced the commercial closure of the first transaction on the GIC platform. Sale of residential apartments continued, and simplification and monetization, Taj Madras Flight Kitchen, we completed it during the quarter.
As far as the net debt position is concerned, I think we continue to focus in terms of the net debt position. While it went up marginally by about INR 120 crore or so, there's nothing unusual. The net debt to EBITDA clearly went down from 2.1 to 1.92. The net debt to equity remained stable at 0.43 or so. I think this is an area where we continue to focus in terms of making sure that the net debt position is under control. That's it in terms of the performance update, and open for questions.
Hello.
Hello.
Can we now open for questions, please?
Yes, I think we can.
Sir, you want me to take the questions on the audio call?
Yes, please.
Yes.
Sure. Thank you. Participants, if you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on phone line will indicate when your line is open. Please state your name before posing your question. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. Participants, you can also queue in your questions on the webcast as well. We will now take our first question in the audio. Participant, your line is open. Please pose your name before taking your question.
Hello.
Yes.
Hi, good evening, everyone. This is Satyam. Puneet, the first question that I had was on the demand trends. We have seen the first half be little weak, but based on checks, we gather that November is looking little stronger than first half, and October we saw continued weakness because of the large number of holidays, et cetera. Do you think October, November put together has seen some kind of an improvement? Because maybe that's a better way to look at it, seeing both the months together. Is that together at least showing some kind of an improvement in the RevPAR trajectory versus the first half? If so, what is driving that improvement? Is it coming from some bit of improvement in the corporate bookings as well, or is it all leisure driven?
Satyam, thank you for taking that up, because you are right, we have to look at October, November together, as October had both Dussehra and Diwali. Obviously the first 10 days of November are looking much more positive than last year. If you take the trend of the last 40 days put together, there is obviously a positive RevPAR growth. At the moment, we are seeing most of the growth is still driven by volume than by rate. The impact of rate should come at certain point of time because the GST reduction has also happened as of 1st of October. By the time you start seeing a reflection of improvement in rates and also some of the plans and changes announced by the government, this should help in the rate improvement. A very normal trend as both occupancy and rate were under pressure.
I don't think occupancy is any more under pressure, and that's when the rates tend to increase. The big question is, can I say when they will increase? I don't have the answer to that today. Definitely by end of November, we should know more because we've just come from the holiday period, and so the comparison is not there. We need at least 10, 15 more normal working days to give some form of guidance.
Yeah.
Puneet, on the F&B revenue side, you showed on the slide that you had 3.6% YOY growth in the quarter. Which then compares very well versus the other luxury companies who have reported so far, who have all seen 7%, 8% decline YOY because of the MICE weakness. Any comments there, in terms of whether you saw any weakness from the MICE side as well, and what helped you avoid that kind of a decline in F&B?
I think I mentioned that in my presentation, that one of the things we have remained focused on is driving market share. The demand is not been as strong as it was the same time last year. That would be fair to say. Our market share growth has been very good, especially in the key markets where almost 50% of our portfolio is. 50% of our portfolio is in Delhi, Mumbai, Rajasthan, Goa, et cetera. In these markets, we are almost market leaders with iconic assets, and that has been helping us either maintain or increase share. If you are able to maintain or increase share, that's one. Second is our growth in our portfolio. If you add a Siddharth, the Goa or a Taj in Agra with 240 rooms, that also helps you to increase the revenue.
Although both are management, so it only accounts on the fee side, but it also is giving us a better footprint and a better opportunity to go to market with different kind of offerings that we have today versus before.
Yeah.
Last question from me. On the Pune hotel acquisition that you have announced, are you in a position to share any details on which property this is or how many rooms does it have? What kind of a chain scale is it positioned at? If it's an operational property, what's the brand now and what will be the brand once you take it over? Any details on this?
I think we will come back in terms of the details because the agreements are yet kind of not yet done actually. We've just done the commercial closure. I think we will announce it maybe in a month's time or so in terms of further details on this. I think all I can say it's that it's an operational property. I think that's that.
Okay, great. Thank you and all the best.
Yeah.
We will now take our next question. Participant, your line is open. Please go ahead.
Hi, sir. Good evening. This is Nihal here from Edelweiss. My first question was, could you say what the current pipeline of management contract rooms are at this point in time?
Yeah.
We have a bit over 5,000 rooms in the pipeline, totaling almost 40 properties, or 41 to be precise. They are divided then over different brands. That is then like a significant acceleration in the Ginger brand, in terms of pipeline, which is good because it's a high margin business for us. There are a couple of properties in SeleQtions. There are a few contracts. Vivanta has seven, SeleQtions has three, 13 properties in Ginger totaling over 1,100 rooms, and 15 as Taj with over 3,000 rooms.
That's very helpful. If I remember right, this number was 4,000 at the start of the year, which has now increased to 5,000.
Correct, or 5,400 to be precise, because some of the hotels have been conversion. A hotel like Siddharth, the Goa, the day it is signed, it went online, so it never reaches the pipeline. The same as for Agra. The day it was signed, it opened. Although when we count number of hotels signed, we count those rooms, but they immediately open. Some other openings because they were in the pipeline, so that keeps happening. It is not exactly the same number that you sign you have always in the pipeline. It is a question of new construction versus conversions. Ginger in Dwarka was also a conversion.
Okay. Just a related data to this will be, how many rooms have we opened in the last six months under management contracts?
In the last six months, we have opened four hotels, and all of them are under operating agreements, and this is totaling 765 rooms. The majority of our, as I said before, there are eight openings that we expect to have in the next five months, and it's also the right time to do that because as we know, the second half is stronger. We also tend to have openings. For example, Dubai property, you don't want to open in July or August or September. It's not going to work. We are targeting an opening in December because December and January are the best months for Dubai. Even now February is strong. You don't open hotels in Dubai in May, June, July, and August.
Similarly, in some other destinations like this, the openings are also higher, just like the revenue is higher in the second half of the year.
Thank you so much, Puneet. Puneet, the second question was on the CapEx front. Obviously, we see that there has been a reduction in the CapEx compared to last year. First, I just wondered, is the current guidance still between INR 300 crore-INR 400 crore, especially in the light that we would be investing INR 250 crore in ELEL investment over the next year?
Yes. We'll continue to invest in our strategic assets and strengthening our market position, especially in this kind of macroeconomic circumstances. There are certain projects where also the CapEx amounts will be coming our way in the next five months.
Yes. I think the other way of looking at it is to look at the overall net debt. I think what we've always guided is that net debt this year will be constant, actually. We don't expect net debt to reduce, nor go higher, actually. That's the way we manage it.
It depends where the EBITDA comes, the absolute amount. If it is a bit higher than last year, which it seems as we look at the first half, we don't know how the second half would be. If the second half was the same as last year and we add the first half, the net debt to EBITDA will go down further.
Yes.
Absolutely. If I understood right, we'll still be able to manage to maintain that number of INR 300-400 crores, including this investment in ELEL, or maybe we could add on to that number?
The ELEL investment, the definitive agreements have to be done. There will be no investment of significant amount in this financial year or the next, or the next. It will be divided over several years. The heads of terms that we have agreed without having signed the definitive agreements have a payment schedule which goes over several years.
Absolutely. Puneet, the last question from my side is that last quarter, I think we were looking at.
I think it's very important you ask this question because I think that kind of information we don't disclose when we disclose to SEBI. I think for all the investors on this call it is important, but not suddenly that we are buying a 15% share tomorrow or day after. It's not going to happen.
Yes.
We have agreed to acquire, and it will be staggered with several milestones over a few years or so.
Yes.
Okay. I think the press release mentioned 2 years, that's why I was putting the number of 125 as a ballpark. Maybe that would be something I'll just look at again. Puneet, the last question from my side was on, I think, in Q1, we mentioned that we're looking at a top-line growth of 7% for this year. As first half has concluded, we are at 4%. Is there a possibility of still achieving that 7% number for this full year?
Sorry, could you repeat that question? Sorry.
Yes. I was asking that, I think at the end of Q1, we are looking at a top-line growth of 7% for this year. Now that the first half is concluded at a top-line growth of 4%, is this still something we can achieve in the remaining part of the year?
Yeah, I think we will continue to work on all the four revenue levers very clearly. We have seen the RevPAR performance in the first half of around 3.9%, so that's number one. Number two is that the F&B is still an important part of our business, and that we'll continue to focus on, and this is the season time. We have always said that while the wedding season should still be there, it should not kind of dilute. The third lever is the growth in management contracts, which I think first half the growth has been about 6% or so in terms of fees from management contracts, actually. That's the third one. The fourth is that the Expressions, especially Chambers, has picked up, actually.
In fact, as we speak up to date, we have probably done about INR 20 crore or so in terms of Chambers billings, which means it's at least an INR 15 crore addition to the bottom line. Therefore, we will work all the four levers. I think at this stage, I don't want to talk about a specific number at the end of the year, but suffice to say that we remain focused in terms of all the four levers of revenue growth, actually.
Sir, that's very helpful. I have more questions. I'll get back in the queue. Thank you so much.
Yes.
If you find that your question has been answered, you may remove yourself from the queue by pressing star two. We will now take our next question. Participant, your line is open. Please go ahead.
Hi, sir. Sumanth here from Motilal Oswal. Yeah. My question-
Hi, Sumanth.
Yeah. Hi. My question is regarding retail demand. The post GST cut, how is the demand from the retail side?
I think the retail is always strong. I think what we saw in the first half was that the RevPAR growth, when we spoke about 3.9%, I think the impact was more for corporate and MICE, actually. The transient customer has always been above 50%. Therefore, I think the retail demand has been strong, actually. That's been helping everyone, actually, as we grow occupancy. You should assume that the retail demand continues to be strong.
Okay. When we talk about the 8.7% room revenue growth, so how is the growth at standalone in the room revenue side, and what is the breakup of OCC and ARR?
Yeah. In standalone for the Q2, we had a very strong occupancy growth, actually. In fact, occupancy in Q2 for standalone was 68.2%, which is an up of about 4.3%. Occupancy growth was very strong. Rate clearly was down. Rate was down by about 4.5% or so. We really drove through occupancies, and these are the big boxes, I think that helped us a lot, actually.
So-
Overall RevPAR growth was about 1.7% for Q2.
For a standalone.
Yes. That's an improving trend. If you look at this year, I think it's an improving trend overall for the industry. I think we saw the starting end of March, April, I think we have been gradually seeing improvements only. Therefore, I think the Q2 trend is certainly an improving trend over Q1.
In the standalone, we have three properties, which are, I think so, it's West End, the Aguada, and Holiday Village.
Yeah.
All three had certain rooms out of order because that was the right time to renovate them and upgrade them. Some CapEx movement was on there, but they have come back very strongly, and are important drivers of growth in the second half, both Goa and Bengaluru properties.
Okay. That means the performance of domestic subsidiary like Piem has improved a lot?
Yes. PM definitely has improved, actually. PM definitely has improved substantially.
When we compare with the standalone and then domestic subsidiary like Piem, the growth of RevPAR might be 2X?
Sorry.
Not really. It's not tourist, Sumanth. Our brandscape is changing so much. The tourist destinations are there. We are still the strongest operator of resort properties, but our hotels are increasing every day in other destinations. It's not just tourism, it's also a lot of business customer base that is increasing more rapidly as a percentage. That does not mean the number of tourists is not increasing, or the number of tourism-related business, domestic or international, both are on an increase, but business increase is higher.
No, my question is the Piem RevPAR and Ginger RevPAR is a 2X of standalone business?
Sorry. Maybe we should take that question offline, Sumanth.
Okay. No problem.
I think Piem Hotels and Ginger, we can speak separately offline.
Okay. What is the tax rate guidance for FY20?
The tax rate guidance, let's see, we have adopted the new tax rates, as you know, Sumanth. Therefore, we will be at 25.1. However, because of some of the permanent differences we have due to U.S. laws and all, we'll be about 30%, 29 point something. Under 30% is what we should assume.
Okay. Thank you so much.
Yeah.
We will now take our next question. Participant, your line is open. Please go ahead.
Hi, this is Amit Agarwal, Nirmal Bang. I just wanted to have more update on this GIC platform. I think you just said that one hotel is being included out there. Can you give us some idea of what's the outflow out there, and how many hotels to be included in next probably year or so?
Of course, there is evaluation going on on other multiple properties, both in terms of acquisition as well as monetization of one or two of our own properties. That evaluation is going on. Right now, all we have announced is that the first deal, small transaction, the first deal of an operating property, we have just concluded the commercial terms, and that is something we'll come back with greater details in about a month's time when more definitive agreements are all done.
Our outflow will not be more than INR 20 CR, it will be somewhere between INR 15 CR and INR 20 CR.
Yes.
Which is very nominal and would be offset with the sale of a few other apartments. That's what we have guided. We said, whenever we monetize on non-core assets, that kind of amount will either go in bringing down the debt or in acquiring strategic assets on the GIC platform or into a growth of our other levers in the system or solving one or the other issue that we have been carrying on for a long time.
Yeah.
Sure. Second question, last question. I believe the foreign tourist arrival has dropped, I think it's about 2% to 3% against a lot more in the earlier periods. Firstly, are you feeling the pain? Secondly, what's the mix of foreign to domestic tourists or let's say, guests in your hotels?
Firstly, we have not seen that kind of pain because luxury is a bit more resistant to drops like this, and most of those foreign tourists for us were coming in our palaces and iconic assets. I think there we have not yet seen any kind of major drop in bookings, whether it's a Rambagh or it's a Lake Palace or the Umaid Bhawan or the Taj Palace in Delhi or Taj Mahal Palace in Mumbai or Lands End. What we've definitely seen is the other way around. We've seen an increase in Delhi, and that is because pre-elections and post-elections, the government business had come to a standstill.
You must have read and seen there are a lot of state visits which are happening, whether it's the royalty coming into India from Sweden or Denmark or Holland, or it is heads of states like Chancellor Merkel or others. I think those kind of visits are actually driving the government business, which was very much missing in the majority of the first half of this year.
Sure. Last question, sorry, just one more question. In the mix of your guests that you have, if I may broadly say, normally you were to talk about the corporates, the OTAs and let's say crew probably is very low. How has the mix changed in the last one year?
I think the mix has largely been steady. I think the way we classify is that ADH, that is the OTAs and all that, has been about 20%-22%. There is no real change in the OTAs actually. The non-negotiated customer, which is the transient, as we call it, has been 50%, 52% or so. I think no fundamental changes at all, actually. I think all we could say is that in terms of the growth, because of the economic situation, we saw some down in corporate and MICE, but that was more than made up by the other segments actually, which is fundamentally the transient.
The corporate and MICE has been a bit weak to your mind in the first half?
Yes, of course. Which is expected. It will pick up now.
Sure. Thanks. That's all from my side.
Yeah.
We will now take our next question. Participant, your line is open. Please go ahead.
Hi, Puneet, Giri. Shalin Desai from UBS. Congrats on a great set of number. Interestingly, your results are relatively better compared to your competition, both in terms of RevPAR growth and F&B growth. Congrats on that side. One of your competitor made a comment that they are able to, or rather the resistance from the corporate in terms of price increase has come down. Are you also seeing that for you to take a-
That is correct, because I think what's happened is both the GST reduction from 28% to 18%. Earlier we saw that there was some resistance in terms of increasing the rate above INR 7,500 because the corporates would then be on the higher slab actually. With this coming down now and as we are getting into the cycle of negotiations, I think we certainly believe that the resistance is lower. I think we'll be able to better update the status of negotiations maybe in a month from now actually. Clearly this is a positive actually. This is a positive.
Great. Just one more thing. Do you have any sense like what is happening in the market in terms of the new agreement, like your market share in the new agreement which are getting signed? You have made a remark earlier that you are almost more than 50% of the market share in the new agreement. Any sense where we stand for the first half in the domestic market?
We continue to dominate, actually. I think that is fair to say.
We would not say 50% or whatever the right number is that some other analyst or research house should give the guidance. I don't think there is any other group which has signed 36 agreements in the last 18 months.
Yeah.
No, that I agree completely, I agree with you on that. Right. What exactly is happening in the international properties? A bit of slowdown over there. Is it seasonal?
No, not at all. Actually, thank you for raising that, because while Giri was presenting and we said that there is a decline in international, the majority of that has been driven by three of our hotels in Sri Lanka in the first half. Although Colombo is beginning to come back very strongly. It had a very strong October because they got a one-off delegation. It's following the terrorist attacks in April. Since you have three hotels in Sri Lanka, and the downfall, for example, in Bentota was like 50% in that fall. That percentage is impact. We have done quite well in both U.S., and London has been phenomenal for us. We mentioned that at the last quarter call also. We see no reason why London will not continue to benefit despite all the Brexit discussions that are there.
We are actually adding some more value into London because we'll be opening The Chambers there within six months time. We are adding a Chinese place there called House of Ming. We will be adding an all-day dining. That's a property which has got great presence behind Buckingham Gate, and we are investing actually more money into London. In terms of CapEx as the previous person had asked, actually, we are spending more money in London and we are earning very well in London. I think this is one of the best six months London has had for us.
Right. The last bit, what kind of losses are we envisaging for Pierre for this year? Any ballpark number?
I think, if I look at the H1, which is quite visible, if you see the exceptional numbers that we show, the exceptional items for the first half, The Pierre clearly, because we provide for it, the loss came down by INR 6 crores or so, INR 32 crores from INR 26 crores. Therefore, The Pierre losses, cash losses, have come down definitely in the first half. I think last year, I think the cash loss was probably around INR 64 crores, INR 65 crores actually. This year it will be about INR 60 crores. About INR 60 crores is what we anticipate in The Pierre. We continue to work on it to improve, actually.
Sure. Great. That's it from my side. Thank you so much.
We will now take our next question. Participant, your line is open. Please go ahead.
Yeah. Thanks for giving me the opportunity. This is Palshuth Palaksaiya from Sharekhan. Most of my questions have been answered. Sir, just on the operating performance, it would be really helpful if you help us to know what was the comparable improvement in the operating margins if you exclude the Indian subcontinent.
For the quarter is around 150 basis points, and for the first half of the year is double of that, 250 or so.
This is on a standalone basis or a consolidated basis?
No, this is on a consolidated basis.
Can you help me out with standalone basis also?
One second. We can get you that number. Actually, we had 230 basis points on the first half on consolidated basis. On standalone, we have to verify the number for a second. I think it is around 30 basis points on standalone.
30? For the first half?
First half is 30.
The first half is 170.
Okay. We believe that this is despite the fact that first half is normally 40% of the business and you have achieved about 150 basis points expansion in Q2 margins and 230 basis points in H1 margins. Second half, we should expect much better in terms of operating margins on the comparable basis?
I think-
The guidance which we have given is 800 basis points. We'll continue to deliver on that. We've delivered it in the last six quarters, and we will continue to deliver going forward.
Thanks, sir. Sir, on the demand front, as you mentioned that October, November looks to be promising. In terms of room rate increase, when do you expect exactly the room rate hike to happen in the industry? From industry perspective, not exactly from IHCL point of view, but from industry point of view, when do you expect a real room rate hike?
Room rate increases. I think now that the occupancy increase has strongly happened as we were discussing, I think as we get into the season, let's see. I think hopefully the room rate increases should start happening. Maybe as Puneet said earlier, let's wait till the end of November before we can talk in terms of what kind of room rate increases we get.
Okay. Thank you. Thanks.
We will now take our last.
Yeah, last question, possibly. Well, this last one was it.
Yeah, we have the last question. We will now take our last question. Participant, your line is open. Please go ahead.
My name is Prashant Shirsagar from UniCredit Corporate Research Private Limited. Thanks for the opportunity. I just wanted your comment on the Middle East business of the company for the half year and the quarter.
Middle East business of our company today is very limited. It's really just one property in Dubai, and that has been doing fairly well as a business leader and is a market leader in the Business Bay area. We are opening a second hotel in Dubai in December, as I said, the Jumeirah Lake Towers. A third one will open at the Palm in Dubai by September, just before the Expo commences in 2020. A fourth one in Dubai Waterfront, Deira Waterfront, in another few years. We are under development with a property in Mecca. That's what it is. The rates in Dubai are under pressure, but the volume is not. The occupancy levels are good. We have a very good F&B revenue base in Dubai.
Our total revenue increase is there, despite a decline in the average rates in the Dubai market in general, and also Business Bay has seen a lot of supply growth. In particular, in Business Bay, there has been a severe pressure on rates. We continue to do well. More importantly, some current contracts where we have a very happy owner.
Okay, thanks. One more question is, your Taj Lands expansion plans have been held up by one of the government permissions. Can you help us with what is the status of that?
I think you, Prashant, I think you mean Sea Rock.
Yeah.
As we have disclosed today, we have a plan to acquire the shares of the Sea Rock so that we are 100% owner. We will do the architectural planning, go for full planning permission. Once we have all that, then go for construction. This is not like a one-year or a two-year project. The good thing is that we have the framework approval. We have to negotiate and close the agreements with our 15% shareholder. If we start today, the day it would open is earliest is five years.
Right.
It's a long-term project, and also needs support from the local government and the planning with the Sea Link, et cetera. All the traffic planning also has to happen, otherwise, if you just build another hotel out there, which is very large, the roads will not be able to take the traffic. All this will happen in tandem. The initial discussions have been going on. I think it will be good for the city, it will be good for the country. It's not a project where we can report every quarter what is happening. It's a two-year planning process, as we have disclosed. After that, another three years to build it. At the earliest. It's not a bit longer.
Sir, just a question then, have you got all the permissions from the government for the project?
How can we go for all the permissions? You go for the permissions and spend the money on architecture and planning once you have cleared all the shareholding. We have had the shareholding, we have had the land. We will start after we have definitive agreements with the shareholder, when we control the property 100%. We will start the development and planning process.
Okay. Thanks a lot. That answers my question.
Yeah.
Sir, there are no further questions at this time. I'm handing over the call back to you, sir.
Yeah. Thank you so much for participating in the call today. For those, if there are any further questions, Nitin and I would be able to take the questions offline actually. Thank you so much.
This concludes today's call. Thank you for your participation. You may now disconnect your lines. Thank you.